Question

Compton Company expects the following total sales: Month Sales March $ 37,000 April $ 27,000 May $ 21,000 June $ 32,000 The company expects 70% of its sales to be credit sales and 30% for cash. Credit sales are collected as follows: 25% in the month of sale, 75% in the month following the sale. The budgeted accounts receivable balance on May 31 is:

Answer 1

Answer:

$11,025

Explanation:

From May sales, Total Credit sales = $21,000*70% = $14,700

Cash Collected in May (for sales) = Total Credit sales * 25%

Cash Collected in May = $14,700*25%

Cash Collected in May = $3,675

Accounts Receivables Balance = Total Credit sales (May) - Cash Collected in May

Accounts Receivables Balance = $14,700 - $3,675

Accounts Receivables Balance = $11,025

So, the budgeted accounts receivable balance on May 31 is $11,025.